For the first time in 30 months, the volume of the passenger car industry is expected to decline 2.5-3% on a year-on-year basis for two consecutive months in August as manufacturers curtail dispatches to dealers seeking to match supplies with a weak demand.
Passenger vehicle makers are expected to end the month with a dispatch (counted as sales) of around 350,000-355,000 units against 359,000 units in August 2023. ET has learned that some automakers have adjusted their production schedules towards the end of the month compared to their budgeted production for the same period.
Industry inventory has risen to 65-70 days, compared to a long-term average of 40-45 days. In the first eight months of the calendar year, the passenger car industry is projected to grow by less than 5%, with total volume reaching approximately 2.84 million units.
August will mark the fourth consecutive month of low single-digit volume growth. This is a sharp contrast to the first quarter of the current year, when growth averaged 11% with sales volume of 1.13 million vehicles.
Dealers expect demand to lull further next month as Pitrupaksha or Shraadh (an annual ancestral ritual in Hinduism performed to pay homage to ancestors and forefathers) sets in from 17 September to October 2. The period is considered inauspicious for the purchase of any big-ticket items. “We now expect demand to pick up only in October with the onset of Durga Puja,” said a car dealer.Going by the current registration trend on Vahan, the government’s Vahan portal, sales are set to decline by 17% month-on-month and 9% year on year. If it pans out that way, the gap between the factory dispatches and retail is likely to widen further.To be sure, close to two dozen new models-mostly SUVs likely to go on sale this festive season, but automakers are not very bullish of it helping in sales turnaround in a major way. Even though the number of new launches this year are almost double of what it was last festive season, the incremental sales will be limited, said an industry executive.
“Like always, the new models will create excitement and increase footfalls, but they are unlikely to push sales in a material way,” the executive said. There’s already a presence of multiple models at varied price points in the SUV market. Whatever gets launched will tend to cannibalise the existing models from the same family or a rival model. Therefore, the incremental sales will be limited. Agreed Arun Malhotra, an auto industry expert. “New models are not expanding the market it will only lead to some shifting of market share.”